While the results of the colossal economic downturn are reflected in the headlines, there is some good news in the economic detail.
The bankruptcy of GM, the related factory closings and employment drop off provide some very ugly news on the economy as does the commentators' opinions of the road ahead for a government funded auto company. Let your mind wander on that one.
The good news is in the detail of the ISM manufacturing survey where the index of new orders -- the leading indicator for the index -- rose to reflect a positive gain, the first in 18 months.
The improvement in first quarter GDP growth included a rise in corporate profits after six quarters of decline and the massive -17% fourth quarter plunge. Despite the recent declines the size of profits as a percent of GDP still stands just above the 20 year average of 9.2%.
Tax refunds helped to boost income growth to 0.5% in April -- the largest gain since the rebate-related rise of May 2008. Given the choice between spending and savings the consumer is now siding with increasing savings given the extreme damage the plunge in equity and home prices left on 2008 household wealth (see March 13 post -- Record Wealth Decline). The saving rate rose to 6% of disposable (i.e. after tax) income in April -- the highest in 14 years. Despite the downward effect on spending and growth, the rise in savings is an improvement from the borrow and spend days we're recovering from.
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